Federal Budget & Tax Update

An Information Service of the AFI Federal Budget and Taxation Committee

August 24, Vol. 6, No. 5
Federal Budget and Tax Update Archives

This report was prepared with the assistance of Sarah Rhyne, Federal Affairs Intern. For more information contact Gerri Madrid, Committee Director, at (202) 624-8670.

Appropriations

Despite leadership promises that most appropriation bills would be completed by the August recess, only two have been sent to the President, leaving eleven left to go. President Clinton signed the Military Construction appropriations bill, which includes the supplemental spending package (see below), into law on July 13, making it the first FY 2001 appropriations bill to be signed into law. The only other bill that has been signed by the President is the Defense Appropriations bill (HR 4576, S 2593), signed on August 9.

Though the House has only one more appropriations measure, District of Columbia (H.R. 4942), on which to vote, the Senate still has five bills it needs to debate and vote on, Commerce-Justice-State (H.R. 4690), District of Columbia, Energy & Water (H.R. 4733), Treasury-Postal (H.R. 4871), and VA-HUD (H.R. 4635). With only 14 days left before Congress is scheduled to adjourn on October 6, there is little time to complete the remaining work on the appropriations bills when Congress returns from the August recess on September 6. Compounding these constraints is the fact that President Clinton has threatened to veto at least six of the appropriations bills in their current form. Therefore, like last year, the appropriations process promises to be long, difficult, and down to the wire.

Agriculture

Agriculture Appropriations is Ready for Conference

After weeks of slow movement on the Agriculture Appropriations bills, the House passed H.R. 4461 on July 11 with a vote of 339 to 82. Action was stalled for weeks because of a provision that would permit sales of food and medicine to Cuba and four other countries accused of sponsoring terrorism. A compromise was reached with the provision's author, George Nethercutt, R-Washington, to remove his language from the Agriculture bill that would have lifted food and medicine sanctions against Cuba, Sudan, North Korea, Libya, and Iran. Republican leaders will try to attach the language in conference.

The Senate approved its version of the FY 2001 Agriculture spending bill (H.R. 4461) on July 20, 79-13. After a heated floor debate, the Senate added $900 million to the measure through a package of 15 amendments for new disaster spending. A compromise was finally struck by Senator Stevens (R-AL) that stated no more emergency spending would be added to the bill if the amendments were passed as a block. This extra spending is on top of $1.1 billion in emergency aid already designated in the bill.

Senators adopted an amendment that makes it easier to import prescription drugs approved by the FDA. This language allows pharmacists and drug wholesalers to import drugs that have been shipped to nations that cap the price of medications. However, before adopting this amendment, the Senate approved a preceding amendment that would allow the drug imports only if the Department of Health and Human Services certified that they posed no health risk and would significantly reduce medication costs to American consumers. The House bill contains similar language.

The spending measure is now set to head to conference after the August recess. However, it looks to be a difficult process because of differences between the two versions on lifting food and medicine sanctions on Cuba. House negotiators plan to include language that lifts the sanctions but would restrict Cuba's financing of U.S. agricultural purchases. The Senate bill lifts the sanctions with no such conditions.

Both bills also contain funding for a number of programs such as the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). The president requested $4.148 billion for this program in FY 2001. The House bill increases funding over FY 2000 slightly, to $4.067 billion, while the Senate bill level funds the program at $4.032 billion. President Clinton has threatened to veto the current versions of the bill because of inadequate funding for food safety, conservation and environmental programs.

Commerce-State-Justice

Commerce-State-Justice Appropriations Passes the House

On June 26, the House passed the FY 2001 Commerce-State-Justice spending legislation (H.R. 4690) with a vote of 214-195. The $37.4 billion measure is about $2.2 billion below the current level and $13.5 billion less than the President's request. The bill provides funding increases for specific programs as well as an overall increase for the Justice Department.

The Senate Appropriations Committee passed its version of H.R. 4690 on July 18. It provides $36.7 billion for the Departments of Commerce, State and Justice. This is $3 billion less than the President's request and about $700 million less than the House-passed version.

These two versions contain several funding and policy differences.

The House adopted an amendment that would exempt the tobacco federal lawsuit from a provision in the bill barring reimbursement to the Justice Department from other departments for lawsuits in which the government is the plaintiff. The House also adopted a provision allowing the Department of Veterans Affairs to give Justice $4 million for its part of the lawsuit. The Senate version, however, prohibits other departments from helping to pay for the Justice Department's lawsuit against tobacco companies.
The House rejected an amendment that would have prohibited the Justice Department from using funds in the bill to enforce provisions of the gun agreement between the administration and Smith & Wesson, a major gun manufacturer. While the Senate bill contains no such language on this issue, Senate Republicans oppose the agreement, calling it a hidden attempt at gun control.
The biggest funding differences are in the state and local law enforcement grants. The House included in its bill $552 million for the Edward Byrne Memorial State and Local Law Enforcement Assistance Grant Program. This is dramatically more than the $400 million that the Senate set aside and the $459 million that the President requested. The Senate also reduced funding for the juvenile justice grants, appropriating only $100 million, $150 million less than the House. The President requested $289 million for this program. The Senate, furthermore, cut funding to the State Criminal Alien Assistance Program by only providing $50 million for the program, $370 million less than the House. The President had requested an increase in funding for this program to $600 million.

Labor-Health-Human Services

Difficult Labor-HHS Appropriations Finishes Conference

As Congress was getting ready to adjourn for the August recess, conferees finished up their $106.2 billion report on the FY 2001 Labor-HHS appropriation bill (HR 4577). Because of partisan stand-stills, the Republican conferees drafted the report in which they agreed to increase the discretionary spending to match the administration's request. However, the report did not make certain policy concessions, placing the money where President Clinton requested, and therefore risks a presidential veto. The conference report will be released in September.

On June 14, the House passed the controversial FY 2001 Labor-HHS appropriation bill (H.R. 4577) by a vote of 217-214. This vote marks the earliest passage of the Labor-HHS measure since 1978. During four days of floor debate, there were unsuccessful attempts to increase funding for the Child Care Development Block Grant, substance abuse and mental health grants, special education, and Pell Grants.

After weeks of floor debate, the Senate passed its own version of HR 4577 on June 30 by a 52-43 vote. Amendments approved during the debate increased funding for consolidated health centers and education Impact Aid. Also approved was an amendment that would allow states to defray their special education costs by spending funds from a block grant intended for school construction and class-size reduction for special-needs students. These funds would be used for programs under the Individuals with Disabilities Education Act.

The Senate version of H.R. 4577 contains substantial cuts in funding for SCHIP, TANF, and the Social Services Block Grant (Title XX). However, Finance Committee Chairman William Roth, R-Delaware, was able to secure an agreement from Appropriations Chairman Ted Stevens, R-Alaska, to eliminate the funding cuts when the bill goes to conference.

During consideration of the bill Senators Roth and Stevens engaged in a colloquy in which Senator Stevens agreed that funds for the State Children's Health Insurance Program (S-CHIP), Social Services Block Grant (SSBG) and Temporary Assistance for Needy Families (TANF) would be restored during conference negotiations with the House. The Senate Labor-HHS bill had proposed cutting $1.9 billion from S-CHIP, $1.1 billion from SSBG, and $240 million from TANF. During the colloquy, Sen. Roth emphasized the devastating impact these cuts would have on uninsured children, the elderly and the disabled, and families who are moving from welfare to work. He also emphasized that Congress had made a commitment to the states for guaranteed funding for all of these programs, and the cuts proposed in the Labor-HHS bill would break those promises. Sen. Stevens responded by clarifying that there was never any intention to enact these cuts into law, and that it was simply a maneuver to move the bill ahead through the Senate. He stated that funds for these programs would be restored, in their entirety, during conference negotiations with the House. It is unclear at this point how the restoration will be funded.

Other key issues remain unresolved, namely the restoration of the transferability provision for SSBG. Under the Transportation Equity Act for the 21st Century (TEA-21) from the 105th Congress, states will be restricted to transfer no more than 4.25 percent of their TANF block grant into SSBG beginning in fiscal year 2001. The 1996 welfare reform agreement established the transferability provision and allowed the states to transfer up to 10 percent of their TANF block grant into SSBG.

The House and Senate versions contain several important and controversial differences. Attached to the Senate bill is a Republican-backed managed care plan that addresses issues, such as the dispute over coverage and the right to sue a managed care plan, splitting House and Senate conferees on separate managed care legislation (HR 2990). Similar Medicare "lock-box" provisions have also been added to the bill. These lock box provisions would take the Medicare surplus out of the federal budget to ensure it is only spent on medical care for the elderly.

The Senate version of the bill increases Head Start funds to $6.27 billion. The House bill increased spending by $400 million to $5.667 billion. As the President requested, the Senate agreed to $2 billion for the Child Care and Development Block Grant. The House has agreed to an increase to $1.583 billion in FY 2001 and to $2 billion in FY 2002, including advance funding. However, that would rescind the FY 2002 increase, bringing the total back to $1.183 billion.

The House version also contains substantial cuts in numerous Labor Department programs such as Adult training and dislocated workers. President Clinton has threatened to veto both bills largely because they do not include the education and labor spending proposals that he has been supporting.

Transportation

Transportation Appropriations Passes Both Houses and Now Heads to Conference

On May 19, the House approved the FY 2001 spending plan for the Department of Transportation (H.R. 4475) in a 395-13 vote. The bill provides the guaranteed funding required by TEA-21 and increases spending for the FAA by roughly 25 percent, highways by 6 percent, and transit by 8 percent. House Transportation Committee Chairman Bud Shuster (R-Pennsylvania) managed to strike language seeking to allow states to use some of their Congestion Mitigation and Air Quality Improvement Program and Surface Transportation Program funds to provide inter-city rail service. The so-called CAFÉ Amendment, which amid concern did not appear in the bill, would have deleted the prohibition in the bill that would prevent the Transportation Department from even studying an increase in higher Corporate Average Fuel Efficiency standards. The Senate adopted a compromise concerning the CAFÉ standards as instructions for its conferees. The language instructs the conferees to accept the House ban on CAFÉ for another year, but only if the House agrees to a study by the Department of Transportation and the National Academy of Sciences to be completed by July 1, 2001. If the study supports it, the department will be able to propose new CAFÉ standards at that time.

On June 15, the Senate approved their version of the FY 2001 Transportation Appropriation bill (S. 2720), 99-0 and has appointed conferees: Senators Shelby, Domenici, Specter, Bond, Gorton, Bennett, Campbell, Stevens, Lautenberg, Byrd, Mikulski, Reid, Kohl, Murray, and Inouye. The bill includes significant funding increases for programs covered by TEA-21. However, the legislation was amended to shift funds from the Airport Improvement program and the FAA's facilities and equipment account to FAA operations, a violation of AIR-21. Senators also rejected, 52-46, the so-called Amtrak Amendment that would have allowed states to use some of their federal highway funds to attract passenger rail service.

A Senate provision requiring states to adopt a legal drunk driving standard of .08 percent blood alcohol content or see a loss of federal funding will be challenged in conference. NCSL has written a letter to conferees opposing this language in the bill. States would lose 5 percent of their highway funds in FY 2003 and 10 percent in FY 2004 for not meeting the federal mandate. A similar measure was debated as a part of TEA-21 and rejected in favor of a voluntary incentive program to reward those states which have enacted the .08 percent standard.

The Senate version of the bill would prevent DOT from implementing its proposed "hours of service" rules. These rules dictate how long commercial truck drivers and bus drivers can be on the road. The House version of the legislation does not address DOT's proposed "hours of service" rules.

While these bills are ready for conference, one has not been scheduled.

VA-HUD-EPA

VA-HUD Bill Has Passed the House

On June 22, the House passed the FY 2001 VA-HUD appropriations bill (H.R. 4635) with a 256-169 vote. The bill provides $101.6 billion in fiscal year 2001 for the departments of Veterans Affairs (VA) and Housing and Urban Development (HUD). Overall, the VA-HUD bill would increase spending by about $9 billion over fiscal year 2000. The bill would fund the Environmental Protection Agency (EPA) at approximately $7.2 billion and the Federal Emergency Management Agency (FEMA) at $877 million.

The House rejected an amendment that would have removed the prohibition from transferring any medical care funding to the Justice Department for use in government lawsuits against tobacco companies. It later approved a second amendment allowing the transfer of $4 million only if the money came from the VA's administrative budget. H.R. 4635 would decrease funding for the Community Development Block Grant program by $295 million providing it with $4.5 billion. However, grants to the states would be preserved at $4.2 billion. There was an unsuccessful attempt on the House floor to increase these amounts.

The state revolving fund (SRF) for clean water infrastructure received $1.2 billion, a decrease of $150 million from FY 2000. The SFR amount for the safe drinking water revolving fund will remain at $825 million, the same as FY 2000. To offset the decrease in SFR funding, the bill would increase pollution control grants under Section 106 of the Clean Water Act to more than $245 million. President Clinton has threatened to veto this bill because he feels that it does not adequately fund every category covered in the bill. The Senate Appropriations Committee markup has been delayed until after the August recess.

Mini-Omnibus Expected To Save Time But Crashes Instead

With the daunting August recess fast approaching and many of the appropriations bills yet to be finished, Republican leaders worked to hammer out a package of appropriations and tax cuts that was sure to win the president's signature. On July 26, leaders tried to create a measure that would hurry the appropriations process along while attaching tax cuts that were minimally objectionable to the Administration. The package included a measure that would use the FY 2001 Legislative Branch spending bill (H.R. 4516) as a vehicle to carry the Treasury-Postal spending measure (H.R. 4871) while increasing the Treasury-Postal bill's discretionary spending by about $1 billion.

The measure also included Senate-proposed language that would reverse $6 billion in spending shifts from FY 2001 into FY 2000 that were enacted as part of the military appropriations law (HR 4425- PL 106-246). This language was based on a promise by Senator Ted Stevens (R-Alaska) to Sens. Phil Gramm (R-Texas) and John McCain (R-Ariz.) who objected to the accounting trick during the debate on the Military Construction conference report. The device would have affected military pay, Social Security benefits, veterans' benefits, and defense outlays in the FY 2001 budget.

Despite the hard work, the mini-omnibus failed to get enough support for its passage and was tabled after two procedural votes on July 27. The measure was hurt by the discarding of House-passed language that would lift prohibitions on food and medicine sales and travel to Cuba. Also withdrawn was language from the House's Treasury-Postal bill that would block the government from giving preferential treatment to gun manufacturers that agree to tougher safety measures. However, despite the collapse of this package, it may reappear after the August recess as time will be running short and members of Congress may look to anything to hurry the process along.

FY 2000 Supplemental Appropriations

Supplemental Spending Bill Signed Into Law

On June 29, the House voted 306-110 to adopt an $11.2 billion emergency spending package. After overcoming contentious debate, the Senate passed the same piece of legislation by voice vote. This package was attached to the Military Construction appropriations bill (HR 4425) during conference. Included in the measure is $600 million for the Low Income Heating and Energy Assistance Program (LIHEAP). It also includes funding $316 million in disaster relief related to Hurricane Floyd and other natural disasters, $661 million for the Cerro Grande Fire emergency, $350 million for wildland firefighting and $35 million to the Social Security Administration to ease the increase in workload related to the passage of HR 5 the Senior Citizens' Freedom to Work Act of 1999 which eliminated the earnings limit on seniors age 65 to 70.

For more information:

Chart of Major Discretionary and Mandatory Program Funding in FY 2000 and proposed funding for FY 2001 from Federal Funds Information for States)
Current Status of FY 2001 Appropriations Bills from the Library of Congress